The global financial markets got people’s attention on Monday. The S&P 500 dropped 3% and markets all over the world fell. For some, it was a source of worry. Whether the day caused your blood pressure to rise or you were able to remain calm, almost no one is immune to financial stress all the time. It can come in the form of economic news but also personal events like a job loss, natural disaster, and more.
So, where do you turn when something rattles your financial confidence? Let’s explore 12 great options for feeling better when something goes wrong and you need a boost.
1. An Understanding of Behavioral Finance
Look, our brains just aren’t designed to make good decisions when it comes to money. Fear and greed are strong emotions that tend to take over in times of financial stress. However, more often than not, they are not the right emotions for making the good financial choices.
Understanding behavioral finance can help you understand the role emotions play in good financial decision making. Here are a few resources for learning:
Article: Behavioral Finance: 16 Easy Ways to Outsmart Your Brain
Book: The Psychology of Money: Timeless lessons on wealth, greed, and happiness, by Morgan Housel
Podcast: Morgan Housel — The Psychology of Money
Podcast: Annie Duke — Thinking in Bets — Poker, Decision Making and Behavioral Finance
Article: The Behavioral Finance Revolution: How Daniel Kahneman Redefined Personal Financial Decision-Making
2. A Long Term Perspective
Life happens. And, you will encounter good days and bad. Your financial situation will experience gains and losses. However, your life and money will generally move in the “right” direction with good decision making.
So, when it comes to your money, it is important that you remember that something like a 3% loss to your portfolio is not the time to sell and lock in the loss. Markets have always recovered and it is highly likely that they will continue to recover in some period of time.
If short term losses worry you, it can be a good idea to review your projected net worth over time. Use the NewRetirement Planner to look at your future net worth during a downturn, not today’s numbers.
3. Go Ahead and Play Out Your Worse Fears
Playing out your worst fears when stressed is a psychological technique often referred to as exposure therapy or defensive pessimism. This strategy involves imagining the worst possible outcomes of a situation and confronting them in your mind.
The NewRetirement Planner enables you to play out your worse fears against your current financial situation. You can see into the worst case future by modeling different “what if” scenarios.
This can be useful as it enables you to:
- Confront what is stressing you out
- See that the worst case is likely to be okay in the long run
- Shift your focus from stress to proactive problem solving as you start to look for solutions to the what is causing you anxiety
4. Know the Difference Between Financial Stress and Financial Problems
Look, there is stress and there are problems. These are two distinct categories and sometimes stress is a reaction to problems that don’t even exist. The following meme made me laugh this week. It is a good reminder to understand the root cause of your stress.
5. Your Financial Advisor
We happened to be meeting with Joe Kuhn (one of our favorite retirement gurus on YouTube) on Tuesday, the day after this week’s most dramatic market turbulence. We were discussing the scare and he mentioned that he thought that having a financial advisor on retainer is a smart way to deal with financial stress.
As of now, this Summer’s dip seems like it may be short lived and not very deep, making it easier to bear. However, are you prepared for a 2-year downturn? We haven’t seen a longer term market decline in a long time, but it can happen and you need to be prepared to make the right financial decisions during times of prolonged stress.
Ideally you have someone you trust to answer questions when things get uncomfortable. Kuhn is not the only expert to recommend that you have someone to turn to when emotions are at play. Author Morgan Housel is also a fan of having an advisor there to help you navigate difficult decisions when emotions are involved.
Sure, financial advice can be expensive and with tools like the NewRetirement Planner, index funds, and a decent understanding of personal finance, it may seem increasingly unnecessary to some. However, having a financial expert on call can be absolutely invaluable in times of financial stress.
A financial advisor should be someone that understands your financial situation and who can act as a sounding board to help you make rational choices when stress has you rattled.
Have you considered professional financial advice from NewRetirement Advisors?
NewRetirement Advisors offers affordable plans. Select from fee-only one-time engagements, on-demand guidance, and ongoing relationships for which the advisor will help you devise long term financial strategies and be there whenever you need support.
Set up a free discovery session with a NewRetirement CERTIFIED FINANCIAL PLANNER® professional to learn more.
6. A Friend or Family Member
Getting input from people you trust can expand your perspective and limit bad decisions.
More importantly, friends and family members can help absorb stress that you are experiencing. Just explaining what is bothering you, even without hearing differing opinions, can quiet noise that might lead you astray. Recounting your problem out loud can help lead you to the right answers.
7. Facebook. Yep, Facebook.
Look. In general we agree that you should never believe almost anything that you read on social media. However, the NewRetirement Facebook group has proven to be a pretty decent source of information. It is a private group and we try to limit spam. When you ask a question there, you are likely to get a range of interesting answers from people who are knowledgeable and helpful.
On Monday, Steve Chen, the Founder of NewRetirement posted:
There were 67 rational responses that would be helpful to anyone stressed out by the dip in prices.
8. Read! Learn ! Books, Turn to Books!
Where should you turn when you are stressed out? Turn to people who are smarter than you! And, the best source of wisdom may just be books. Click here for a big lists of favorite books related to retirement, personal finance, and aging that may be of use during times of financial stress.
And, here is some wisdom on why reading and learning is so useful for helping you with stress:
“To acquire the habit of reading is to construct for yourself a refuge from almost all the miseries of life.” – W. Somerset Maugham
“An investment in knowledge pays the best interest.” –Benjamin Franklin
“Education is the key to unlock the golden door of freedom.” –George Washington Carver
“A book is a garden, an orchard, a storehouse, a party, a company by the way, a counselor, a multitude of counselors.” – Charles Baudelaire
“Books are a uniquely portable magic.” – Stephen King, On Writing: A Memoir of the Craft
“The reading of all good books is like a conversation with the finest minds of past centuries.” – Rene Descartes
9. A Personal Finance Club
We are hearing of more and more people joining a personal finance club. These seem to be groups of people who meet regularly to discuss the details of their financial situation and get input on what to do from their peers. We know of in person groups and many more online clubs that meet over Zoom.
We think this is a fantastic idea and a great way to feel supported during times of financial stress. Learn more about starting a club.
Clubs have formed organically on the NewRetirement Facebook group, among friends, and by moderators.
10. Yourself
Okay, stick with me for a second.
You, talking to yourself, might not be the best source of solace. We tend to be pretty hard on ourselves.
However, if you were to talk to yourself as if you were giving advice to a friend, you are probably going to get a much better perspective on your problems.
11. Acknowledge the Emotion, Name It!
When you label an emotion, it activates the brain’s prefrontal cortex, which is involved in reasoning and decision-making, and calms the amygdala, the brain’s emotional center. This process, known as affect labeling, allows you to create a sense of distance from the emotion, making it easier to understand, process, and respond to it in a more balanced way. By naming the emotion, you gain control over it, rather than letting it control you.
Confidence is not the absence of doubt, but rather the ability to move forward despite it. True confidence involves acknowledging doubts and uncertainties while trusting in your skills, judgment, and resilience to navigate challenges. It’s about believing in your capacity to overcome obstacles, even when the path ahead isn’t entirely clear.
12. Have a Written Plan and Stick to It
Whether it is the plan you maintain within the NewRetirement Planner, the printed report you get from a financial advisor, an Investment Policy Statement, or your own asset allocation strategy, having a plan, understanding why it is your plan, and sticking with it, is one of the best ways to stay on track and make sure that your emotions don’t derail your long term financial security.
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